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Tuesday, 21 July 2015

Islamic Finance to fund Sustainable Development Goals

As part of its commitment to the SDGs, the Islamic Development Bank has announced it will increase its funding of SDG related activities through its ten year strategy framework, from $80 billion recorded during the MDGs, to $150 billion over the next 15 years (2016-2030).

Dr Savas Alpay, said the SDGs, which contain 17 goals and 169 targets, and are expected to replace the Millennium Development Goals (MDGs), could address major global challenges and promote financial inclusion especially to the under-privileged segment of the society.

He called on world leaders to move faster, take strong and decisive actions in order to fulfill the commitments made by governments and international agencies for the implementation of the SDGs.

“Islamic finance has footprint in Asia and Middle East, is ripe for growth in South America and Europe and has future markets in North America, Central Asia and Australia.

Its global assets have grown considerably and are estimated to have reached US$1.8 trillion by 2014 with compounded annual growth rate of about 15-20 percent,” the Chief Economist stated.

Dr Savas Alpay said IDB is a pioneer in initiating innovative means of Islamic finance, and the instruments applied in this mode of financing have the potential to address key targets of the SDGs such as food security, provision of shelter, building infrastructure, providing sustainable energy and ensuring financial inclusion.

He added that Islamic financial instruments like Sukuk (Islamic capital market instruments), could be utilized as an effective non-traditional means of mobilizing resources for the implementation of the SDGs. Dr Alpay told delegates at the conference that IDB has used such instruments in funding a number of short term and long term development activities.

Dr Sami Alsuwailim of the IDB explained the concept of Islamic finance as a participatory system of financing whose core principles are accepted globally irrespective of faith or nationality.

Dr. Mahmoud Mohieldin of the World Bank, said there are several advantages provided by Islamic financial services, and that is why the World Bank is paying significant attention to them.

He stressed that during the financial crisis, the World Bank noticed that Islamic financial institutions developed some resilience, and because of the provisions of Islamic law that prohibit certain types of transactions like gambling and speculation, Islamic finance is linked with the real economy and prevents institutions from accumulating debt beyond reason.